Members Health warns changes to the private health rebate could push up to 3 million Australians aged 65+ to consider downgrading or dropping out of private health insurance, driving longer public hospital waits and higher overall costs. Independent modelling shows Commonwealth savings of $482m could trigger $547m in additional public hospital costs. The Alliance is calling for the proposal to be reconsidered and reviewed through a Parliamentary Inquiry.
Members Health, the national alliance representing more than 20 not-for-profit and member-owned health funds, has warned the Federal Government’s proposed changes to the private health insurance rebate could drive millions of older Australians out of private cover and place further pressure on already overstretched public hospitals.
While acknowledging the fiscal pressures addressed in the 2026–27 Federal Budget, Members Health said the proposed rebate changes would disproportionately affect lower-income retirees and long-standing policyholders.
Independent actuarial analysis shows around 3 million Australians aged 65 and over would be affected under Labor’s decision to reduce the private health insurance rebate for older Australians.
The changes are equivalent to an average premium increase of around 9 per cent for affected members, with some facing effective increases closer to 12 per cent on top of normal annual premium rises.
For many Australians with Gold hospital cover, this could mean paying more than $300 extra each year. Some households — particularly older couples — could face premium increases from 1 April 2027 exceeding $1,000 annually, and in some cases up to $1,600.
Around 70 per cent of insured Australians aged over 65 earn $55,000 or less, while more than 80 per cent fall within the base income tier, meaning the impact will fall heavily on lower and middle income seniors.
Members Health CEO Matthew Koce said the changes risked undermining viability of the private health system.
“The Australians who rely most heavily on private health insurance are the very people now being asked to pay significantly more to keep it,” Mr Koce said.
“These are older Australians on fixed and modest incomes, many of whom have maintained private cover for decades.”
“When increases of this scale hit household budgets, people downgrade cover, delay treatment or leave the private system altogether. That inevitably pushes more demand back onto our overstretched public hospitals.”
Members Health said even modest reductions in participation among older Australians could have significant consequences across the healthcare system, including:
- increased demand for public hospital services;
- longer waiting times for elective surgery; and
- additional pressure on already stretched State and Territory health budgets.
The organisation also warned of flow-on risks for private hospitals, where older Australians account for a substantial share of admissions and surgical activity.
“If private hospitals become financially unviable, the consequences will extend far beyond retirees,” Mr Koce said.
“Carers, families and younger Australians who rely on timely elective surgery and specialist care would also face longer waits and reduced access as demand shifts onto already overstretched public hospitals.
“Delays in treatment also place significant additional pressure on family members and unpaid carers, many of whom are already balancing work, caring responsibilities and rising household costs.”
More than 70 per cent of surgeries in Australia occur in private hospitals, with Australians aged over 65 representing a significant proportion of demand.
Older Australians are among the highest users of hospital services, and previous Government commissioned analysis has found that maintaining private health insurance participation in this cohort delivers strong value for taxpayers by reducing pressure on the public system.
Mr Koce said there was a serious risk the measure would become a “false economy”.
“Independent actuarial modelling shows these changes may reduce Commonwealth rebate expenditure by around $482 million, but could shift approximately $547 million in additional costs onto public hospitals,” he said.
“Savings in one part of the Budget should not create larger costs, longer waiting lists and poorer outcomes elsewhere in the health system.”
“The Government cannot strengthen Medicare with one hand while weakening private hospital capacity with the other.”
Members Health welcomed the Government’s broader healthcare investments, including additional funding for Medicare Urgent Care Clinics, aged care, public hospitals and the NDIS.
However, Mr Koce said those investments could be undermined if policy settings simultaneously pushed older Australians out of private cover.
“We support investments that strengthen the healthcare system overall, but that should not come at the expense of affordable private health insurance for older Australians,” he said.
“If the Government’s objective is a more equitable and sustainable healthcare system, the impacts of these changes need to be fully examined before they proceed.”
Members Health is calling on the Government to reconsider the proposal and establish a Parliamentary Inquiry into its impact on consumers, hospitals, carers and the broader health system.
Appendix A: Impacted insured persons by income tier
Appendix B: Typical impact on an insured member with base income tier under a Gold policy
Media Contact
brenton.baldwin@membershealth.com.au
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